The intense competition in retail over free shipping policies is expected to bring some pain to Q4 margins as big box and e-commerce firms scrap for market share, warn analysts.

ComScore reports that free delivery on online purchases rose to 68% in 2014, up from 44% last year.

Amazon (NASDAQ:AMZN): 2014 shipping costs were up 32% through Q3. That mark comes before a holiday season in which the company says it saved customers a mere $2B in shipping fees.

Wal-Mart (NYSE:WMT): The Bentonville giant has already warned investors it will spend heavily on e-commerce and fulfillment center expansion as it eyes +30% growth in online sales. The company may have difficulty dialing back its free delivery policies, say industry insiders.

Target (NYSE:TGT): Wolfe Research projects a 1% shift in Target sales to e-commerce cuts into the firm's profit margin by 5 bps.

What to watch: Online sales rose 16% in Q3 vs. 4% for broad retail, a differential that is expected to have widened in Q4. Retailers with a sharp shift in mix to online could have trouble hitting consensus EPS estimates.

The strong reads on consumer spending (ICSC, Redbook) bode well for Q4 earnings in the retail sector, note analysts.

Electronics sellers (BBY, HGG) and the luxury sector (RL, TIF, COH, KORS, KATE, FOSL, VRA) are viewed as being in a good position to see a December boost.

Companies which eased off on pulling a bulk of their sales forward with Black Friday/Cyber Monday deals are also seen as potential winners with sub-$2 gas resetting some holiday budgets.

Though e-commerce is expected to dazzle again this holiday season. It's not all fun and games for analysts looking at margins. The extension by Amazon (AMZN-0.1%) of its free shipping offer could be a signal that inventory levels are higher than anticipated and that the growth-at-all-costs mentality at the company is as entrenched as ever, notes Nasdaq Advisory Services.

The S&P Retail ETF (NYSEARCA:XRT) has doubled up the return of the S&P 500 over the last 3 months, 10.8% vs. 5.1%.

Best Buy Co Inc Best Buy Co Inc is a retailer of technology products, including tablets and computers, televisions, mobile phones, large and small appliances, entertainment products, digital imaging and related accessories.